There are many things you must learn by doing. Golf is one, pool is another, talking, walking, riding a horse or a bike. The list is near endless. You don’t learn by doing, you learn by doing it wrong.
Why then do people get caught up in rules, procedures and methods when learning things like budgeting, planning, saving and investing?
Simple. They want the tactics before they understand the strategy. They want how before what and fail to notice that what is nuanced. Tactics are easy and not hard to put down on paper or into a YouTube video so people offer them.
Tactics make no sense without a strategy to hang them on, yet people try. Think about this Richard Branson idea:
You don’t learn to walk by following rules. You learn by doing and falling over.
It is like that for most things. A teacher or guide can help you but not until you get the idea of what you are trying to do. By the time I was 17 I already knew how to walk and run, but I can recall a sprint coach talking about stride form and recovery and alignment. Small adjustments like toe angle make tiny differences, but in sprint competition a tenth of a second is a big deal.
How much refinement would have made sense if I did not know how to walk? Not much.
It is the same deal with planning. Just start. A simple budget need include only a few things.
- Cash income you receive from your work. Deductions from your income are another planning problem and not part of your day to day budget.
- Committed expenses like loan payments, insurance of various kinds, club fees, cell phone plan, and rent.
- Non-discretionary expenses. In this case fixed by need but variable in amount. Gas, food, parking, bus fares, hydro, heat, clothing.
- Discretionary variable expenses. Things you can stop doing or change the amount spent if the money is short. Recreation, restaurant meals, vacation.
You can get a useful document with only a little effort. Once you get on to it, you can refine it later. Maybe even buy a book.
Most other aspects of planning follow the same pattern. Get an overall idea of the task and refine it once you understand it better. Retirement planning and investment are, conceptually, not very different from a budget. Just a delayed start to spending and in the meantime a way to store the money you will need to support the spending. Same idea with insurable risks. Understand the risk idea before buying a product.
The idea is to involve yourself in assessing the future. Anticipation is the key to managing your affairs and rules too early in the process don’t help. I knew a GE executive once who said he would never hire an MBA who did not have business experience before getting the degree. Without the experience they knew rules and technique but were less clear on the idea of business.
Same thing with finances. Learn by doing. Maybe talk about the overview ideas with someone who’s been there. Just start and make some mistakes. In the beginning only the idea matters.
Don Shaughnessy arranges life insurance for people who understand the value of a life insured estate. He can be reached at The Protectors Group, a large insurance, employee benefits, and investment agency in Peterborough, Ontario. In previous careers, he has been a partner in a large international public accounting firm, CEO of a software start-up, a partner in an energy management system importer, and briefly in the restaurant business.
Please be in touch if I can help you. firstname.lastname@example.org 866-285-7772